Ukraine’s dollar-denominated bonds rose in price after the Democratic Party’s decisive victory in the US midterm elections. Investors believe this will help improve relations between Kyiv and Washington and strengthen defence support for Ukraine.
In particular, the price of Ukrainian bonds with a 4.5% coupon and maturing in 2034 rose by more than one cent and climbed above 63 cents on the dollar of face value. That is the highest level in more than a month. On Wednesday, 4 November, Ukrainian notes were among the top gainers across emerging markets.
Investors link the move to the defeat of the Republican Party of US President Donald Trump. The American leader’s relations with Ukraine and President Volodymyr Zelenskyy had remained strained. In particular, Trump criticised Kyiv over strikes on Russian oil refineries, which he linked to rising oil prices.
Democrats taking control of both chambers of Congress could likely benefit Ukraine, which depends on US intelligence and weapons supplies.
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“Recent news has been negative following attacks on Ukraine’s energy infrastructure network. The market now expects that the new Congress could prevent any disruptions in intelligence-sharing with Ukraine or restrictions on its access to the Starshield system,” said Viktor Szabo, Chief Investment Officer at Aberdeen Investments.
The US election results could also affect the atmosphere around talks on ending Russia’s war against Ukraine. The first changes could become noticeable in the coming days.
US negotiators are due to meet in Brussels with representatives of Ukraine and European countries to prepare the next round of talks in Abu Dhabi, scheduled for next week.
At the same time, it is still unclear whether Donald Trump will change his stance on the war after the election. The results could limit his ability to pressure Volodymyr Zelenskyy into agreeing to a deal to end the war.
However, Capital Economics chief economist Neil Shearing suggests that Trump may more actively assert his foreign-policy powers if a Democrat-controlled Congress curbs his influence at home.
In Shearing’s assessment, the US president may try to end the war quickly on terms more favourable to Moscow. In that case, pressure on European countries would intensify: they would be expected to further increase defence spending and take greater responsibility for the continent’s security.